Using competition for taxpayer value in public services

Using competition for taxpayer value in public services

February 22, 2011 3:24 PM

Government run services will be expected to open up to private sector competition with payment-by-results contracts giving providers incentives to improve service quality, the Prime Minister has said in the Daily Telegraph. Downing Street has said the plans will go further than previous similar reforms in specific areas of the public sector because they will be generic, introducing a general presumption for being open with specific exemptions for areas such as defence and the judiciary. The state, David Cameron said,

“Should be open to real diversity, open to everyone who gets and values the importance of our public sector ethos. This is a transformation: it ends the state’s monopoly over public services.

“Instead of having to justify why it makes sense to introduce competition in individual public services – as we are now doing with schools and in the NHS – the state will have to justify why it should ever operate a monopoly.”

If Mr Cameron’s strong rhetoric is matched by suitable legislation, this proposal should be hugely beneficial to users of public services and taxpayers alike. Allowing private operators to reformulate service provision, motivated either by charitable zeal or profit-seeking efficiency to strip out waste and tempt the public to use their offering has obvious advantages. The pressure to cut elements of spending that people simply do not value will certainly be greater on charitable organisations or private sector companies than on state officials, whether the money saved will be redeployed into spending on something new managers think is more worthwhile (in the case of the charity) or possibly for private profit (in the case of a private sector provider.)

An important detail the Government must get right is the question of for whose custom the operators will be competing. Introducing external competition so government agencies can ‘outsource’ their operations is certainly a step in the right direction but will not always be the appropriate design. It would still leave an official standing between the public service user and the service provider. To reap the full reward of competitive forces, drive up quality and give the public what they want from public services the Government must pay attention to when it should allow new operators to compete directly for end users rather than for contracts with commissioning officials.

Taxpayers will not be happy about private companies making excess profits from cushy contracts or charities using taxpayers’ money to advance their own agenda. But as long as there is open competition taxpayers should benefit. Private companies must remain nervous that they will lose their contracts and customers to more efficient competitors and go out of business unless they keep the service quality they deliver high and their charges low. As long as the government keeps operators on their toes, it may just be able to inject some much-needed private and voluntary sector efficiency and vigour into our public services.Government run services will be expected to open up to private sector competition with payment-by-results contracts giving providers incentives to improve service quality, the Prime Minister has said in the Daily Telegraph. Downing Street has said the plans will go further than previous similar reforms in specific areas of the public sector because they will be generic, introducing a general presumption for being open with specific exemptions for areas such as defence and the judiciary. The state, David Cameron said,

“Should be open to real diversity, open to everyone who gets and values the importance of our public sector ethos. This is a transformation: it ends the state’s monopoly over public services.

“Instead of having to justify why it makes sense to introduce competition in individual public services – as we are now doing with schools and in the NHS – the state will have to justify why it should ever operate a monopoly.”

If Mr Cameron’s strong rhetoric is matched by suitable legislation, this proposal should be hugely beneficial to users of public services and taxpayers alike. Allowing private operators to reformulate service provision, motivated either by charitable zeal or profit-seeking efficiency to strip out waste and tempt the public to use their offering has obvious advantages. The pressure to cut elements of spending that people simply do not value will certainly be greater on charitable organisations or private sector companies than on state officials, whether the money saved will be redeployed into spending on something new managers think is more worthwhile (in the case of the charity) or possibly for private profit (in the case of a private sector provider.)

An important detail the Government must get right is the question of for whose custom the operators will be competing. Introducing external competition so government agencies can ‘outsource’ their operations is certainly a step in the right direction but will not always be the appropriate design. It would still leave an official standing between the public service user and the service provider. To reap the full reward of competitive forces, drive up quality and give the public what they want from public services the Government must pay attention to when it should allow new operators to compete directly for end users rather than for contracts with commissioning officials.

Taxpayers will not be happy about private companies making excess profits from cushy contracts or charities using taxpayers’ money to advance their own agenda. But as long as there is open competition taxpayers should benefit. Private companies must remain nervous that they will lose their contracts and customers to more efficient competitors and go out of business unless they keep the service quality they deliver high and their charges low. As long as the government keeps operators on their toes, it may just be able to inject some much-needed private and voluntary sector efficiency and vigour into our public services.

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